Raouf, BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) Cagri, SAGLAM (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) Thomas, VALLEE (UniversitŽ de Nantes)
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We use two stage optimal control techniques to solve some adoption problems under embodied technical change. We first solve a benchmark problem without learning behavior. At the date of switching, the consumption level is shown to drop, as the relative price of capital goes down (obsolescence). In such a case, the economy sticks to the initial technology, or immediately switches to a new technology with a higher level of embodiment, depending on how the obsolescence costs compare to the induced growth advantage. In a second step, we introduce learning. The learning curve involves fixed costs and incentives to wait as well. Adoption is shown to depend on the growth advantage of switching net of obsolescence and learning fixed costs. The economy will switch if and only if this indicator is positive. If it is big enough to ÒcompensateÓ the option of waiting, then the economy switches immediately. Otherwise, the economy waits
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Find related papers by JEL classification: E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Jeremy Greenwood & Boyan Jovanovic, 1998.
"Accounting for Growth,"
NBER Working Papers
6647, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Jeremy Greenwood & Boyan Jovanovic, 2000.
"Accounting for Growth,"
RCER Working Papers
475, University of Rochester - Center for Economic Research (RCER).
[Downloadable!]
Jeremy Greenwood & Boyan Jovanovic, 2001.
"Accounting for Growth,"
NBER Chapters,
in: New Developments in Productivity Analysis, pages 179-224
National Bureau of Economic Research, Inc.
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